With the US elections mere weeks away, pro-Biden sentiment in the battleground states appears to suggest big trouble for Trump. PhillipCapital Research Analyst Yeap Jun Rong predicts that if Trump fails to win Florida in November, he will become the US’s latest “one-term president”.
“The state of Florida has been an accurate bellwether of US election outcomes since 1964. In the past 14 elections, the candidate who won in this state won the presidential seat 93% of the Time,” Yeap writes in a broker’s report on Oct 28. The only time it failed to do so was when Bill Clinton won a crushing landslide victory in 1992 with a 68.8% majority in electoral votes.
“Today, Biden’s lead in Florida seems to be holding up well. If it continues, we expect Biden to have a marginal win in Florida,” Yeap adds.
See also: Biden presidency and Republican senate best case for US Dollar, says OCBC
Within the main battleground states of Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin, Biden is currently leading Trump by 3.8 points on Oct 26. In contrast to Hilary Clinton’s failed 2016 run, Biden has recorded better poll ratings in all of these states except Wisconsin. Clinton lost Michigan by 0.3% and Pennsylvania and Wisconsin by 0.7% in 2016, losing the latter despite a massive 5.4% lead in the state in 2016.
Covid-19 will likely benefit Biden in these swing states, with Florida, Pennsylvania and Wisconsin experiencing a high risk of infections with positive rates exceeding 10%. States like Michigan and Wisconsin have seen total reported cases doubling over the past two weeks. Consequently, delayed reopenings have hit the economies of Florida and Pennsylvania hard, with the former in particular experiencing a surge in food stamp participation in August.
“Amid the resurgence, Biden has extended his lead over Trump in Michigan and Pennsylvania. We expect the virus situation to worsen, given the White House’s focus on vaccines and treatments rather than virus control,” says Yeap, who also believes that Florida and Pennsylvania’s economic woes could turn these states off Trump. With both states controlling 49 votes in the electoral college, Trump could lose the election without their support.
Consequently, DBS FX Strategist Philip Wee and Rates Strategist Eugene Leow see the two main scenarios going forward as being a Biden presidency alongside either a Democratic or Republican senate.
Currencies have traditionally weakened under a “blue wave” of Democratic control of congress and the White House, as Democrats are not considered pro-business and stock market friendly. The silver lining is that they will likely push through the stalled US fiscal stimulus bill to reignite the US economy.
“Longer term, a Republican-held Senate is considered positive against the Democrats’ agenda of tax increases, regulating Big Tech and socialist tilt,” says Wee and Leow.
But in truth, they warn, the correlation between market performance and the partisan affiliation of the president typically diverges post-elections for the rest of the year. External factors less correlated with the election outcome are often salient to currency strength as well.
“Currencies weakened after the 1992 election but were on average strong after the 2008 election. The USD was generally supported after the Exchange Rate Mechanism crisis (when George Soros broke the Bank of England) in September 1992, and weak going into the Fed’s last rate cut to 0-0.25% and its first quantitative easing program during the global financial crisis in 2008,” note the analysts in an October 28 Macro-strategy update.
The pair therefore warn inventors to beware several risks awaiting FX following the election on Nov 3. A no-deal Brexit on Dec 31 and a “re-infected global recovery outlook” could spur further monetary easing in the Eurozone, UK and Australia, they warn. These could eclipse medium-term positives for the global economy from a Biden presidency such as a potential return to multilateralism from unilateralism and the renewal of US relations with its allies.
As of Oct 28, The Economist predicts that Joe Biden has a 95% chance of defeating Donald Trump in the electoral college with a projected 352 electoral votes to Trump’s 186. Aggregate polls from FiveThirtyEight see Biden leading Trump by 9.2 points at 51.9% to Trump’s 42.8%.
